Credit Suisse Asset Management has integrated ESG factors into its actively managed China A-shares equity strategy, according to a statement from the firm.
Launched in 2017, the Credit Suisse China A-shares equity strategy offers access to the China A-share market via the Stock Connect programme. It aims to seek out market leaders and emerging disruptors with strong sustainable competitive advantages to generate long-term returns, the firm said.
The firm said that ESG compliant firms tend to make better business decisions for a longer time horizon. Such firms also intend to be less exposed to reputational risks and other hazards stemming from non-compliance.
With China A-share’s further inclusion into global equity indices and increasing participation of foreign institutional investors, standards for ESG and transparency will be further raised and companies with better and improving ESG practices are likely to benefit more from capital flows.
“We have found that incorporating ESG considerations not only allows us to improve our expected returns, it also reduces our portfolio risk,” Rushil Khanna, head of equities for Asia at Credit Suisse AM, said in the statement.
“Many investors, particularly in emerging markets, have a view that incorporating ESG leads to lower investment returns. We have found the opposite to be true. By going beyond basic exclusion criteria to integrating ESG into our investment process, we have gained a unique and differentiated perspective to investing in China,” Khanna added.
The initiative follows the firm’s establishment of the new sustainability, research and investment solutions (SRI) function in August last year, with the commitment to provide at least CHF 300bn ($338.1bn) of sustainable financing over the next decade.